Machine economic life estimation based on depreciation-replacement model

Abstract

Decision-making is considered as the cognitive process resulting in the selection of a belief or a course of act among numerous substitute possibilities. Today, decision-making helps to opt for the best assets i.e. machine tools, equipment etc. of firms under several concerns such as depreciation value, price, replacement, maintenance cost, repairmen cost, power consumptions etc. which augments the effectiveness of operations of production units. Recently, the problem of replacement is realized, when the job performing units such as men, machines, equipment, parts etc. becomes less effective, uneconomic, useless due to breakdown, sudden failure and gradual deterioration in their efficiency by the passage of time. By replacing those assets with new ones at frequent interval, maintenance and other overhead costs can be reduced. The work presented a replacement model combined with straight-line depreciation method, which can be used to determine the economic life of the productive machines and equipment. The proposed approach helps the managers and the owners of the business firms in computing the economic life of their machine. Numerical case has been presented, in order to justify the validation of the proposed model.

Keywords

• replacement theory
• maintenance
• depreciation
• straight line
• economic life